Secrets of a Shoe Dog … what I learnt about business from Nike’s co-founder Phil Knight

May 7, 2017

Phil Knight always wanted to be a sub-4 minute miler. In the late sixties he trained with the elite athletes at the University of Oregon under Bill Bowerman, the unorthodox coach who would try anything (like moulding his athletes rubber shoes with a waffle iron) to find an edge.

Eventually Knight resigned himself to being not quite good enough as a runner, and so started selling running shoes from the back of his van at track meets. He started importing new lightweight shoes from Japan, made by Tiger (now Asics), ripping off the stripes and replacing them with a swoosh (drawn by his girlfriend for $35). Despite studying accountancy, he showed a remarkable creative streak.

Blue Ribbon Sports emerged as a business, in which coach Bowerman joined him. Searching for constant innovation, ways to grow a business, and tap into the just emerging running boom. BRS became Nike, the largest sports company in the world. I remember buying my first pair of Waffle trainers in the mid-seventies – from the then small, cult brand – and have worn Nikes ever since.

Knight recently launched his biography “Shoe Dog” retelling his story, and the most important things he thinks matters in running a successful business:

1. Use your 20s to learn and explore

After graduating from college and grad school, and spending a year in the Navy, 24-year old Phil Knight decided he wanted to make a trip around the world. He asked his parents for money — it was the early ‘60s, and travel was still exotic and expensive — and boarded a plane to Hawaii.

In the months that followed, Knight continued his world travel and visited Japan, Hong Kong, Vietnam, the Philippines, India, Kenya, Egypt, Turkey, Germany, France, England, and a handful of others countries. Many of the historical, cultural, and economic lessons he learned on his travels, he would remember and apply for life.

2. Believe in what you do

Knight’s first job (in Hawaii) was to sell encyclopedias. His second one was to sell securities. He was terrible at that first job, and mediocre at his second. It occurred to him that as an introvert, perhaps he was just not cut out to be a salesman. But when he went on to sell shoes, much to his own surprise he turned out to be a master salesman almost from day one.

Why? Because this time he believed in what he did. When Knight was in college at the University of Oregon, he had been a track athlete in the college team. He ran because he was good at it, he liked it, and he wanted to win. It made him a credible shoe salesman down the road. This was a product he believed in, and it was a sport he believed in.

3. Just do it

When travelling around the world, Knight had a “crazy idea” of setting up American distribution for a Japanese apparel company. In his mid-20s, with no cash, no company, and no successes as a salesman, Knight nevertheless boarded a train from Tokyo to Kobe, and arranged a meeting with executives from Onitsuka, the Japanese company known for its Tiger shoes.

When he was asked whether he represented a company, he said yes (even though he in fact didn’t have company). A few years later, he again made his partner believe he had an East coast office, when in fact he did not, and he also pledged to buy a number of shoes he could not afford to pre-finance.

In each of the cases, though, he did follow through on his words: He set up a company (Blue Ribbon, later rebranded Nike), he set up an East Coast office (In Wellesley, Massachusetts), and he did find financing for his order. He just did it.

4. Find trustworthy partners, on the job and in your personal life

From early on, Knight built his company with the help of a few loyal employees: former athletes from his college or competing teams, his former coach, a few trusted accountants and lawyers and so on. He trusted them.

And vice versa: The parents of one of his first employees even gave him their last savings, when his company was in need of cash. They did it because “If you can’t trust the company your son works for, who can you trust?”

He started dating his wife Penny around age 30, and her impact was equally profound. She was not a girlfriend, he said, but a partner. At first, she helped out Blue Ribbon as the company’s first accountant. Later, she would become the bedrock of her and Knight’s family. From his memoir, it is clear he sees those early employees, business and life partners, as crucial in his later success.

5. Don’t be reckless, but when you go all-in, go all-in

Knight worked full-time jobs as accountant and assistant professor for several years, while working nights and weekends on Blue Ribbon. Only a few years in, he quit his day job to dedicate all of his time to his company.

The reason for doing so was partly because he wasn’t sure his startup company would succeed, and partly because he needed a stable income to pay his personal bills. But when he did decide to go all in with Blue Ribbon, there was no way back. He almost literally bet the house, by pledging his house as guarantee for a business loan.

6. Make sure you know what you want, and say it

Over the years, Knight learned to negotiate business deals, including ones on financing, manufacturing, distribution, and work contracts. Crucial in this regard, he said, is to know going into a negotiation what it is you want, and to say it up front.

To one financing partner, for example, he said upfront he would not accept the company to take any equity in Blue Ribbon — they’d only be allowed to give a loan. To one of his early suppliers, he laid out how important timely delivery was. Being clear about his objectives avoided misunderstandings about them later.

7. Always have a plan B

One of Knight’s most important lessons came when he learned that his sole shoe supplier, Onitsuka, was going behind his back to cut him off and work with other US distributors. As soon as he found out, he started working on a plan B: to produce his own line of shoes.

When a year or so later his supplier indeed cut him off, “Nike” was already in stores. It was a shoe with quality issues at the very beginning, but at least he had it. It allowed him and his 30 employees to hit the ground running, and continue the operations and sales of Blue Ribbon. Had Knight a year earlier not been as prescient, the end of the Onitsuka contract would have almost certainly meant the end of his company.

8. Keep control of your own business

On several occasions, Knight deliberately kept control of his own company, refusing a buy-out from his Japanese supplier, and refusing to give some (but not all) of his early employees a share in the company’s equity. That may sound hard, but as founder, he deemed it necessary to keep a controlling stake in his company.

It was only after more than a decade of being in business that Knight finally came around to the idea of an IPO, to sell a large number of shares to the public. But once again, he did so on his own terms: Public shareholders would only access so-called “B”-shares, which gave dividends, but not equal voting rights, to the new shareholders. As majority “A”-shareholder, he once again kept control of the company himself.

9. Offer your teammates hope and a cause to believe in

When Blue Ribbon/Nike was left to fend for itself, the atmosphere at the company was at first all doom and gloom. It was, after all, the Onitsuka shoe that had made the company a success, and now that same company had just cut them off.

To lift his employees’ spirits, Knight offered a tale of hope, optimism, and self-confidence. It wasn’t the Onitsuka shoe that made our success, he told them. It was your hard work. If anything, the breakup meant that Blue Ribbon could finally do things its own way, with better time deliveries and a product fully tailored to the US market. The story had its effect: It lifted the Blue Ribbon employees’ spirits.

10. Always keep the fighting spirit — but know when enough is enough

Throughout the first 15 years or so of Nike’s existence, Knight went through an almost never-ending series of ups and downs, which he could only get through by continuously fighting for survival. He fought for credit lines, he fought a legal battle with his former supplier, Onitsuka, he even fought the US government for charging him unfair import taxes.

He always gave it his all, as if his company’s survival was on the line (as very often, it actually was). But when push came to shove, and the time came to make a deal, he knew when to stop. He settled out of court with Onitsuka, getting half the money he initially wanted, and he settled with the US government, paying them a third of the money they initially told him he owed them. That must have cost him some of is pride, but it did allow him to move on. He knew when enough was enough.

Half a century after his first trip to Japan, Phil Knight is no longer the inexperienced, adventurous, daring new kid on the block. He is the founder and chairman emeritus of Nike, the largest sports company in the world, with a market valuation of about $85 billion. Just like an athlete might “just” run a gold medal-winning Olympic race, he had to put in tens of thousands of hours of practice to get there. In “Shoe Dog,” he shared all his lessons he learned along the way. If you read only one business memoir this year, let it be this one.